Case Note & Summary
The petitioner, Karan Sahgal, a franchisee, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim relief against the respondent, Lakme Lever Private Limited, the franchisor, arising out of a franchisee agreement dated 8 October 2010. The agreement contained an arbitration clause (Clause 24) which provided for a three-tier dispute resolution mechanism: first, amicable settlement; failing that, reference to a sole arbitrator appointed by the parties within 15 days; and if no agreement on the sole arbitrator, then a three-member tribunal where the franchisor appoints one arbitrator, the franchisee and promoters jointly appoint the second, and the two appointed arbitrators appoint the third. The petitioner invoked Section 9 without first attempting to appoint an arbitrator. The respondent opposed the petition on the ground that the petitioner had not exhausted the arbitration mechanism. The court held that a Section 9 petition is not maintainable when the arbitration agreement provides for a specific mechanism for appointment of arbitrators and the petitioner has not taken steps to invoke that mechanism. The court also observed that the clause providing for the franchisor to appoint one arbitrator is not per se unconscionable or invalid. The petition was dismissed with liberty to the petitioner to take steps in accordance with the arbitration clause.
Headnote
A) Arbitration Law - Section 9 Petition - Maintainability - Arbitration and Conciliation Act, 1996, Section 9 - Petition under Section 9 is not maintainable when the arbitration agreement provides for a specific mechanism for appointment of arbitrators and the petitioner has not exhausted that mechanism - Held that the court cannot entertain a Section 9 petition unless the petitioner has taken steps to appoint an arbitrator as per the agreement (Paras 4-6). B) Arbitration Law - Unilateral Appointment Clause - Validity - Arbitration and Conciliation Act, 1996 - Clause providing for franchisor to appoint one arbitrator is not per se unconscionable or invalid - Held that such clauses are common in franchise agreements and do not vitiate the arbitration agreement (Para 5).
Issue of Consideration
Whether a petition under Section 9 of the Arbitration and Conciliation Act, 1996 is maintainable when the arbitration clause provides for a specific mechanism for appointment of arbitrators, and whether the clause providing for the franchisor to appoint one arbitrator is valid.
Final Decision
The petition is dismissed. No order as to costs. Liberty to the petitioner to take steps in accordance with the arbitration clause.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- maintainability of petition when arbitration clause provides for appointment of arbitrators
- validity of unilateral appointment clause
- interpretation of arbitration clause
- interim relief pending arbitration
